FTSE Russell, a global index provider, has published the results of its 2023 global asset owner survey, an annual study analyzing how sustainable investment (SI) is perceived, considered, and used by asset owners across the world.
After five years of steady growth there has been a global dip in
sustainable investment to 80 per cent this year, from 88 per cent
in 2022, a new 2023 global asset owner survey by FTSE Russell reveals.
Though not a significant change, this dip can be attributed to
influential macroeconomic factors, such as high interest rates to
combat inflation, and geopolitical volatility caused by the war
in Ukraine, the firm said in a statement. Despite short-term
influences on sentiment toward sustainable investment, the firm
believes that respondents maintain their long-term conviction for
this investment theme.
Asset owners take a robust long-term view of their sustainable
investment strategies while focusing on key priorities such as
energy transition and well-run companies that prioritize
environmental, social and governance considerations, the firm
continued. The research shows that an equal number (73 per cent)
of asset owners are implementing passive and active sustainable
investment strategies, highlighting the mainstream
characteristics of sustainable investment being part of the
flight to passive investment strategies.
Where constructing investment portfolios has become more
challenging due to macroeconomic-induced factors, investors also
want to ensure that they are not encountering investment
opportunities that are considered to be greenwashing and
potentially damaging to their reputations and members’ interests,
the survey shows. Governance is a priority that has significantly
risen across all regions. The research has highlighted an
increase in the priority of governance to asset owners this year
compared with last year. The firm believes that governance is
likely to continue as a priority focus area, which is also a
supportive trend for the sustainable investment theme in general.
Certain pressures on asset owners appear to be more complex as
the sustainable investment industry matures, the firm added. Some
asset owners’ priorities are included in their investment
strategies. Governance is, but social and broader environmental
themes are less so, highlighting that asset owners need to make
more provisions so their investment strategies are more inclusive
and representative of their priorities.
Perceived barriers do exist particularly because of lack of data
quality, the survey shows. Fifty-eight per cent of respondents
identified that as a challenge to meet regulatory requirements.
In parallel, asset owners are identifying areas that can be
resolved, such as by accessing the right, high-quality data and
choosing effective data partners.
Fixed income remains the top asset class for sustainable
investment allocation, the firm continued. Globally, 45 per cent
of respondents indicated that they have implemented or are
considering implementing sustainable consideration in fixed
income, versus 66 per cent in the Asia-Pacific region.
Infrastructure sees the most sustainable investment
implementation and considerations (59 per cent) in EMEA, the firm
added. Among fixed income asset classes, sovereigns topped the
asset classes in which sustainability considerations have been
implemented for the Asia-Pacific region, in contrast to the
global preference for credit/corporate returns.
“Our research demonstrates the continual evolution of SI among
asset owners and the differing priorities across the
globe,” Sylvain Château, global head of Product, Sustainable
Finance & Investment at LSEG, said.
“While the long-term trend for SI reflects a very positive
trajectory, macroeconomic and geopolitical factors have
influenced respondents’ short-term sentiment. Additionally,
accessing the right data and choosing effective data partners can
help to alleviate concerns around gaps in data and poor data
quality. But as sustainable investment strategies continue to
mature and a focus on governance grows, the quest for the right
data is likely to become an even greater priority for asset
owners,” Château added.